Indicate whether the property acquired qualifies as replacement

property for each of the following involuntary conversions:

a. The Harts’ personal residence is destroyed by a hurricane. They

decide not to acquire a replacement residence but to invest the

insurance proceeds in a house that they rent to tenants.

b. Faiqa’s personal residence is condemned. She uses the proceeds

to invest in another personal residence.

c. Tonya owns a storage warehouse used for business purposes. A

flood destroys the building, and she decides to use the insurance

proceeds to rebuild the warehouse in another state.

d. Ramona owns an apartment building that is destroyed by a flood.

She uses the insurance proceeds to build an apartment building

nearby that is out of the flood zone.

Q485.:

Jessica’s office building is destroyed by fire on November 15, 2021.

The adjusted basis of the building is $410,000. She receives

insurance proceeds of $550,000 on December 12, 2021.

a. Calculate her realized and recognized gain or loss for the

replacement property if she acquires an office building in

December 2021 for $550,000.

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b. Calculate her realized and recognized gain or loss for the

replacement property if she acquires an office building in

December 2021 for $495,000.

c. What is her basis for the replacement property in parts (a) and

(b)?

d. Calculate Jessica’s realized and recognized gain or loss if she

does not invest in replacement property.